Build To Rent investment rockets, focussed on major cities

The latest Build To Rent report prepared by lettings agency Savills claims 2023 saw a total of £4.5 billion of investment in UK BTR schemes.

This was the second highest year’s investment on record, following £4.6 billion in 2022. 

Single Family Housing took £1.9 billion of that, accounting for 42 per cent, up from just eight per cent in 2022.

Savills notes that a key factor driving the surge in investment is the demand for rental homes. Strong rental demand is linked to elevated mortgage rates, lower numbers of buy to let properties and the end of the Help to Buy scheme; the report warns that if the government is to reach its 300,000 homes per year target, 60,000 homes will need to be delivered for private rent each year.

The UK’s Build to Rent stock surpassed what Savills calls “a significant milestone”of 100,000 completed homes, with a further 53,800 homes under construction. 

The future pipeline currently stands at 112,800 homes, including those in the pre-application stage. This brings the total size of the sector to 267,000 homes.

Guy Whittaker, head of UK Build to Rent research at the agency, comments: “Despite the macro-economic challenges – elevated cost of debt and continued material and labour-cost inflation – the sector has proven resilient. The BtR market has seen continued growth due to the housing supply and demand imbalance and high levels of rental growth. This has led to inflation-matching returns while yields have proven comparatively strong.

“The fundamentals of investing in BtR remain sound with growing possibilities to leverage operational efficiencies from better data on portfolio performance and experience. This has put the sector in good stead for its next phase of growth and we project the sector will grow to reach 360,000 homes by 2033.”

Savills notes in its report that the planning pipeline has also expanded beyond concentrations in the North West, especially around Liverpool and Manchester, while there are emerging sites in the Midlands and South East. 

Over the next five years, London and the core cities are expected to provide 62 per cent of completions, with London providing 35,000 homes and core cities delivering 33,000 new BTR homes.